Rupee goes from first to last in Asia

The currency has slumped 2.4% since the end of December

India’s rupee has gone from being the best-performing Asian currency last quarter to the worst this year as rising crude prices and tensions over Kashmir weigh on sentiment.

The currency has slumped 2.4 per cent since the end of December, missing the rally in its regional peers on optimism over US-China trade talks. It weakened to 71.515 per dollar yesterday, from as strong as 69.23 in early January.

“The risk for the India story, which is keeping the dollar well bid vis-a-vis rupee, is higher oil, followed by Kashmir tensions and the political uncertainty,” said Ashish Vaidya, head of trading at DBS Bank Ltd. in Mumbai. “If the negative factors are sustained, for instance, if the Kashmir situation worsens, the rupee could soon touch 73.”

Losses deepen

The rupee’s losses have deepened in recent days amid escalating tensions between India and Pakistan following a terrorist attack by a Pakistan-based group of Islamist extremists in Kashmir last week.

Crude oil has surged more than 20 per cent this year as Saudi Arabia and Russia pledged to expand their output cuts and on concern US sanctions against Venezuela and Iran will exacerbate a tightening of supply.

The rupee weakened by 15 paise to trade at 71.38 against the US dollar in early trade yesterday amid heavy foreign fund outflows and subdued domestic equity markets.

At the forex market, the domestic unit opened weak at 71.35 and slipped further to 71.46. However, it pared some losses to trade at 71.38.

The rupee had closed 7 paise lower against the greenback Friday at 71.23. On a weekly basis, it had registered a loss of 8 paise.

Foreign portfolio investors (FPIs) sold shares worth a net Rs9.66 billion, while domestic institutional investors (DIIs) bought equities to the tune of Rs8.53 billion on Friday.

The dollar index, which gauges the greenback’s strength against a basket of six currencies, dipped 0.17 per cent to 96.74.